about how we trace back the ownership of a tract of land or an oil & gas lease through time. Some title opinions contain lengthy string formulas (positioned under the owner’s name) that tell the story as to how title evolved—with each element representing a different title transaction. For example, Little Red Oil, LLC owns all the leasehold and working interest in a 160-acre tract of land: its interest can be shown by string formula as (10%*1/2) + 1/4 + 1/3 + 11/30; or it could also be represented as just “100%”— which would negate the history. The benefit of historical formulas is they provide a clear, traceable path from some base point in ownership down to current interests. This transparency allows clients to verify the examiner’s calculations, ensuring trust and accuracy in ownership determination. By showing each step in the ownership chain, the formula acts as a roadmap, making it possible to check back against records or run sheets if needed. But here is the thing - this traditional way of showing fractions works great for simple, single- tract units where the history is straightforward. However, when we are dealing with large, multi- tract units, these historical formulas start to look like a tangled web of spaghetti -math. You see, in these complex setups, ownership is not just split once or twice; it is split multiple times, across numerous tracts, with various events like deeds, probates, assignments of oil & gas leases and assignments of overriding royalty interests, affecting the title over time. The “Two Column” Method: In addition to the string formula, Table 1 also uses two columns: a Working Interest column and a decimal revenue interest column, defined as Net Revenue Interest. An argument I hear from Texas practitioners is: “the string formula under the owner’s name is absolutely necessary because we have to show our work; the division order analyst has to be able verify the examiner’s calculations.” Yes! Of course, and the reason for having to include the string formula to begin with is precisely because Table 1 is missing a very critical “constant”/element in the equation: the actual lease net revenue interest; without
which, it is impossible to verify the calculation in the “Net Revenue Interest” column of Table 1 . Fortunately for the division order analyst, the string formula under the owner’s name includes this most important mathematical constant. A very simple solution, however, is to add a third column to Table 1— providing for the actual lease net revenue interest—and thereby completing the equation for a simple calculation and verification of the decimal revenue interest ( i . e ., WI x lease NRI = the decimal revenue interest). We will discuss the “third column” method in a moment; but first let use conclude this section of the article by observing that using the old-school string-formula “two column” method can: Confuse rather than clarify : With each tract potentially having its own chain of title transfers, the formula can become unreadable and ineffective for showing ownership clearly. • • Be inefficient : When historical fractions and string formulas are included, they often need to be formatted from an Excel spreadsheet or similar into a text- based format that is more “readable” in a title opinion. This process of recasting the formula from “2/3*3/4*(7/8- 5%)*60/80+1/4*5/6*60/80” to something more like “2/3 of 3/4 of (7/8 less 5%) of 60/80 plus 1/4 of (5/6) of 60/80” requires additional time and effort (and creates additional “failure points” for the examining attorney.) This can significantly extend the time spent on each opinion, which directly translates to higher costs for the client. Miss the forest for the trees : Sometimes, what clients need is a simplified view of ownership rather than a detailed history, especially when they are managing multiple tract units. So, while the historical fraction method has its place in showing how ownership has evolved, in large, multi-tract units, it is often better to adapt. We might use a “root” fraction approach, where we start from a more recent, stable point of ownership, or we might simplify the fractions to make them more digestible. This does not mean we ignore issues of transparency, traceability and verification; it just means we present it in a way
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N at i onal A ssociation of D i v i s i on O rder A nalys t s
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